Outsourcing remains a key priority, becoming the lifeblood of businesses, irrespective of their size.
What is working in outsourcing and where is the improvement? Are they higher quality, more efficient, or more cost-effective? What is the focus in favor of investment?
Many asset classes are now providing real estate solutions across a range of areas.
Outsourcing real estate accounting helps companies save costs. It enhances the financial reporting and operations of the organization.
Real estate businesses outsource their accounting to gain efficiency and expertise across their processes.
What Gets Outsourced?
According to KPMG, 58 percent and 45 percent of real estate firms outsource property and fund accounting, respectively.
84 percent of real estate firms indicate fully or partially outsourced tax preparation and filing.
Alternately, treasury and cash management (20%) and investor and performance reporting (17%) are the least likely services to outsource.
Roles That Are Often Outsourced
From property maintenance to payroll, most businesses still keep most functions in-house, even though many are open to doing more.
The office accountant is more than an accountant. They focus on working solutions to keep a close eye on expenses and to keep costs as low as possible.
One of the easiest decisions any business owner can make is outsourcing their accounting operations.
Outsourcing arrears management to a specialist service provider delivers double-digit cost savings versus doing the work in-house.
Specialist outsourcing providers can cut costs through economies of scale. Their use of continuous process improvement tools maximizes functional efficiency.
Hiring a tax professional can reduce the burden of critical non-core functions by managing them in a more efficient, productive, and profitable manner.
Outsourcing tax preparation tasks gives in-house tax staff more time to find and research new tax-saving ideas.
It also frees them up to provide more guidance to the administrator team.
Accounts Payable Clerk
Managing accounts payable in-house can be a daunting task. As the business environment gets more competitive, outsourcing accounts payable work is a viable solution to free up staff time.
However, individuals with accounting backgrounds and experience to act as an outsourced accounts payable clerk are in demand.
Outsourcing is a key area and now integral to the business model of Fund administrators.
It is imperative to concentrate on having strong controls around the governance and oversight of all outsourcing arrangements.
Ensuring legal compliance is critical and often leads to hiring an outside fund administrator specializing in staying on top of legal changes.
Moreover, outsourced fund administrators are increasingly embracing automation technology.
Meanwhile, a shift in pricing model from billable time to fixed transaction fees has placed pressure on margins.
Percentage Processes that get Outsourced
|PROCESSES||OUTSOURCING PERCENTAGE||CONSIDERING OUTSOURCING PERCENTAGE|
|Tax preparation and filling||
|Investor and performance reporting||
|Treasury / Cash Management||
|Trust a/c and banking||
Source: Real Estate Fund Administration Outsourcing survey, KPMG LLP
Challenges In Real Estate Accounting As Per Experts
Companies with global operations or properties usually struggle with numerous statutory reporting requirements under different accounting standards in each country.
Agents and companies fail due to the lack of a proper classification of expenses, which then leads to the inability to track money spent and ROI correctly.
There is a ton of paperwork still associated with real estate transactions that need to be handled.
However, tracking commissions from the accounting process:
- reduces transparency
- creates needless reporting
- produces more work for everyone involved
Maintaining a precise payroll is of utmost importance. Staff paychecks will fluctuate week to week, complicating payroll.
With regulations concerning ownership, valuations, expenses, taxes, and more, it’s a challenge for owners to keep up.
Key Motivating Real Estate Agencies to Outsource
A lot goes into real estate. There are plenty of tricky formulas and calculations that can be used to gauge the profitability of a business.
But the simplest question to ask is whether or not you are bringing in more than you are spending.
If the answer is no, the number of properties you are closing doesn’t mean anything.
You need to look at the preference to outsource accounts and where you can sharpen your pencil.
Maintaining real estate accounting simplifies administration and accounts which helps in cutting down on debt and maximizing business revenue.
- Maximizing Profit
Higher profit businesses see account reconciliation and banking as key focus areas where efficiency can have a significant impact.
- Improved Operational Efficiency
Cloud technology made it possible for remote staff to do tasks without sacrificing quality.
Management has oversight ability with no backup and maintenance needed that can result in lag times.
Enhanced Customer Service Quality
When businesses focus on high-value work and streamline their processes, it eventually benefits the customers.
Global Talent Access
While the wage of an outsourced employee is considerably lower than that of onshore staff, the skill and standard of work are not.
With outsourcing, real estate agencies now have access to a diverse and experienced skill-set.
Use of Accounting Software
Many business owners do not have the expertise needed to use accounting software properly.
Access to a Variety of Accounting Services
Third-party firms are capable of handling a variety of operations including:
- income tax returns
- accounting for distributions
- bank reconciliations
- month-end closing and reporting
- statement of cash flows
Outsourcing Benefits Summary
Outsourcing has strengthened the operational performance and capabilities of real estate businesses.
It is a vital solution for accurately managing accounting books in a timely manner.
Overall, there is significant potential to improve productivity and client experience by leveraging new technology, automation, and outsourcing services.
- Apartments image by Pexels on Pixabay
- Calculator image by Steve Buissinne (stevepb) on Pixabay
- Edited using Canva
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